In the diagram for the market for reserves, if the borrowed reserve does not equal zero, and the Fed lowers discount rate, at the new equilibrium, borrowed reserves will remain the same but non-borrowed reserves will increase non-borrowed reserves will remain the same but borrowed reserves will increase both borrowed and non-borrowed reserves will increase both borrowed and non-borrowed reserves will decrease The Fed uses operating targets as well as intermediate targets because the Federal Reserve Act of 1913 requires it to do so. the Fed controls intermediate targets only indirectly. the public is much more unfamiliar with the variables used as operating targets, so for policy to be effective intermediate targets must also be announced if one set of targets proves ineffective in attaining policy goals, the other set is available. In the diagram for Fed funds market, if borrowed reserve equals zero and the Fed funds rate is below discount rate, an increase in reserves requirement will raise Fed funds rate lower Fed funds rate It's unclear how it will affect Fed funds rate The discount window is another name for the discount rate. the means by which the Fed makes discount loans to banks the spread between the discount rate and the T-bill rate the period each month during which banks are allowed to apply for discount loans The inflation gap can best be described as